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Government plans to decriminalise certain offences under Financial Sector Laws

June 17, 2020

The Ministry of Finance, Department of Financial Services on June 08, 2020 has issued its statement of reason for Decriminalization of minor offences for improving business sentiment and unclogging Court processes[1]. The Ministry in its statement has proposed decriminalization of various offences under 19 different Statutes which it considers minor and also the legal processes involved in resolution of such offences as an impediment in ease of doing business. Such offences inter alia include offences relating to dishonour of cheque under Negotiable Instrument Act, 1881, offence under SARFAESI Act, 2002 etc.

Decriminalization of certain offences- Ministry invites Comments/Suggestions

The Department of Financial Services while enumerating the offences proposed by it to be decriminalized has invited comments/ suggestions by Stakeholders regarding decriminalisation of a particular Act or particular Sections of an Act alongwith the rationale for the same.

Some of the criminal offences that the Ministry proposed to classify into civil offences include bounced cheques which can lead to imprisonment of up to two years or a fine up to two times the value of the cheque or both under the Negotiable Instruments Act, Public deposits in violation of Section 3 of the Banning of Unregulated Deposit Schemes Act and four sections under the RBI Act.

The Ministry has further remarked in its Statement that the time taken in resolution of these cases by the Court and lengthy legal processes hampers ease of doing business. The Central Government has been tirelessly working to enhance the ease of doing business in India and that imprisonment for minor offences discourages business owners and acts as an obstacle in attracting investment from both domestic and foreign investors. The changes in financial laws will be critical in reviving businesses in the wake of COVID-19 outbreak. Further, the Finance Minister had already disclosed Government’s plan to reclassify several criminal offences as civil in her budget speech in February.[2]

The Department of Financial Services said in the official statement of reasons that “Criminalising procedural lapses and minor non-compliances increases burden on businesses and it is essential that one should re-look at provisions which are merely procedural in nature and do not impact national security or public interest at large”.[3]

All stakeholders have been requested to submit their views by June 23, 2020.

[1] https://financialservices.gov.in/sites/default/files/Decriminalization%20-%20Public%20Comments.pdf

[2] https://www.thehindu.com/business/budget/companies-act-to-be-amended-to-decriminalise-civil-offences-fm/article30710824.ece

[3] https://financialservices.gov.in/sites/default/files/Decriminalization%20-%20Public%20Comments.pdf

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